NCLT Allows Withdrawal of CIRP Based on Sole Financial Creditor's Unconditional Consent
NCLT Allows Withdrawal of CIRP Based on Sole Financial Creditor's Unconditional Consent
Introduction
The National Company Law Tribunal (NCLT), New Delhi, Court-IV, has held that if there is a stay on the meetings of the Committee of Creditors (CoC), then the unconditional consent of the sole financial creditor is sufficient for the withdrawal of the Corporate Insolvency Resolution Process (CIRP).
Factual Background
The resolution professional filed an application under Section 12A of the Insolvency and Bankruptcy Code (IBC) read with Regulation 30A of the CIRP Regulations, seeking withdrawal of the CIRP of the corporate debtor. The application was based on a settlement between the corporate debtor and the operational creditor, and the sole financial creditor, HDFC Bank, had given its unconditional consent for the withdrawal.
Procedural Background
The NCLAT had directed the NCLT to dispose of the application expeditiously but stayed the meeting of the CoC until the disposal of the application. The resolution professional submitted that the CoC was constituted with the sole financial creditor, and the bank had filed an unconditional affidavit for withdrawal of the CIRP.
Issues
1. Withdrawal of CIRP: Whether the unconditional consent of the sole financial creditor is sufficient for the withdrawal of the CIRP when there is a stay on the meetings of the CoC.
2. Applicability of Section 12A: Whether Section 12A of the IBC requires approval of 90% of the CoC for withdrawal of the application in this case.
Reasoning & Analysis
The bench of Justice Jyotsna Sharma (Member-Judicial) and Anu Jagmohan Singh (Member-Technical) observed that Section 12A and Regulation 30A prescribe the approval of 90% of the CoC for withdrawal of the application. However, in this case, the sole financial creditor had given its unconditional consent, which was sufficient for the withdrawal of the CIRP. The tribunal also noted that the NCLAT had directed it to dispose of the application expeditiously, and considering the settlement between the parties and the unconditional consent of the sole financial creditor, the application was allowed.
Decision
The NCLT allowed the application for withdrawal of the CIRP, holding that the unconditional consent of the sole financial creditor was sufficient in the circumstances.
Implications
The decision highlights the importance of the consent of the financial creditors in the withdrawal of CIRP proceedings. It also clarifies the procedure for withdrawal of CIRP applications under Section 12A of the IBC.
Conclusion
The NCLT's judgment in this case provides clarity on the requirements for withdrawal of CIRP proceedings under Section 12A of the IBC. The decision is significant for corporate debtors, financial creditors, and resolution professionals.
In this case the petitioner was represented by Mr. Mustafa Alam, Ms. Yashima Sharma, and Ms.Navya, Advocates. Meanwhile the respondent was represented by Mr. Shailendra Singh and Mr. Abhyuday Dhashmana, Advocates.
